Quoin Pharmaceuticals Ltd. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This annual filing reports full-year results, not results for the fourth quarter alone. Quoin is a clinical-stage pharmaceutical company with no commercial products or product-sales revenue. Its lead candidate, QRX003, is being developed for Netherton Syndrome (NS).
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.67 million | $1.56 million |
| General and administrative expense | $6.58 million | $4.50 million |
| Total operating expenses | $9.26 million | $6.06 million |
| Net loss | $9.38 million | $21.46 million |
| Operating cash used | $8.48 million | $5.72 million |
| Cash and investments at year-end | $12.85 million | $7.48 million cash |
FY2022 net loss attributable to shareholders was $9.45 million, including a $65,000 deemed dividend related to a warrant modification. The FY2021 loss included substantial non-cash warrant and convertible-note fair-value expenses, helping explain the year-over-year reduction. No operating margin is meaningful because the company had no revenue.
At December 31, 2022, current assets were $13.37 million and current liabilities were $3.53 million. Total liabilities were $7.05 million, including $4.12 million due to officers and founders; the company also reported $1.15 million of accrued interest and financing expense. The filing does not present conventional funded bank debt as a material balance-sheet item. Year-end cash was $2.86 million, with $9.99 million in short-maturity U.S. Treasury bills.
Changes and notable financial items
- R&D expense rose 71%, mainly as QRX003 moved into clinical testing; G&A rose 46%, reflecting public-company costs, compensation, travel and share-based compensation.
- Operating cash use increased year over year. Investing cash use of $10.15 million largely reflected purchases of Treasury bills, rather than operating investment alone.
- The August 2022 offering generated approximately $14.9 million in net proceeds. Subsequent to year-end, the February 2023 offering generated approximately $6.0 million net, before any proceeds from common-warrant exercises. The financing and related securities issuances are dilutive.
- Management said available resources, including the subsequent offering, were sufficient to fund the business plan for at least one year from issuance of the financial statements, but additional funding will be needed to advance development and sustain operations.
Business, outlook and risks
- QRX003 is a once-daily topical lotion under development for NS. Its first U.S. study is randomized, double-blind and compares two doses with placebo over 12 weeks; patient screening and dosing had begun. A second, open-label study was cleared to proceed in December 2022 and was enrolling ten NS patients receiving off-label systemic therapy. No efficacy results are reported in the supplied filing text.
- Other pipeline programs include QRX004 for recessive dystrophic epidermolysis bullosa, and QUT research/options for QRX007 (NS) and QRX008 (scleroderma). The company expects expenses to increase as QRX003 development advances.
- QRX003 is not approved, and the company has no product revenue. Development, regulatory approval, manufacturing, commercialization and future revenue timing remain uncertain. Management intends to self-commercialize in the U.S. and Europe if approved and has established distribution or marketing partnerships covering multiple other territories.
- Key risks include clinical-trial outcome and enrollment uncertainty, need for additional capital and potential dilution, dependence on third-party and limited-source manufacturers, and continued Nasdaq listing requirements. The company regained compliance with the minimum bid-price requirement in August 2022 but cautioned that future compliance is not assured.
- The Skinvisible license provides for single-digit royalties on licensed product net sales, 25% of certain sublicense royalty receipts, and a $5 million payment upon the first U.S. or EU approval of a product using the licensed intellectual property.
- A former Polytherapeutics owner has asserted a breach-of-contract payment claim of $666,667 related to a research and consulting agreement. No lawsuit had been filed as of the financial-statement issuance date; management says it believes it has meritorious defenses. The company reported no material legal proceedings otherwise.
- The 2022 financial statements received an unqualified audit opinion. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Current clinical-trial enrollment, completion timing and any reported safety or efficacy data for both QRX003 studies.
- Cash runway and projected spending against the disclosed funding needs, including the impact of the February 2023 financing and outstanding warrants.
- Fully diluted share count, warrant terms and potential dilution; the ADS ratio is 1 ADS per 5,000 ordinary shares, and ordinary shares outstanding increased substantially after year-end financing.
- Status of Nasdaq listing compliance, the Polytherapeutics dispute and settlement of accrued interest and amounts due to officers.
- Progress toward regulatory milestones and the financial obligations under the Skinvisible license if a product is approved.